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3 Questions to Consider When Choosing a Life Insurance Policy

If you’re not sure where to start with choosing a life insurance policy — or if you’re re-evaluating your current policy and looking to lower your premiums or increase your coverage — consider these three questions to help direct your decision making.

Choosing a life insurance policy can feel extremely overwhelming. After all, the decision has major implications for your financial future and the future of your family.

Fortunately, life insurance plans are not a one-size-fits-all product. With the right knowledge and planning, you can choose a policy that fits your coverage needs and provides the best financial outcomes for your unique situation.

In fact, there are four main types of life insurance plans — term, whole life, variable, and universal — and even within those categories, each policy is unique.

If you’re not sure where to start with choosing a life insurance policy — or if you’re re-evaluating your current policy and looking to lower your premiums or increase your coverage — consider these three questions to help direct your decision making.

1. How Much Life Insurance Coverage Do I Need?

In general, the industry standard suggests that life insurance coverage should equal 5-10 times your annual salary, but this is an oversimplification.

The amount of coverage you need also depends on factors like your age, the ages of your spouse and dependents, your current income and savings, and your debts.

For example, if you have young, dependent children and want to pay for their future education, you may need higher coverage. On the other hand, if you have no children and you and your spouse are both seniors, you will likely not need to purchase as much coverage.

Additionally, any ongoing mortgages, loans, and leases should factor into your planning. If you have a high mortgage payment, you’ll want to make sure your life insurance provides enough coverage so that your beneficiary can continue to make those payments. If you have no mortgage or loans to pay off, then you may not require the same amount of coverage.

2. What Premium Rate Can I Afford?

Premium rates increase as you age, so purchasing life insurance when you’re younger is typically the most cost-effective option.

But no matter how old you are, take time to examine your current budget and finances and decide what you’re willing to pay in premiums. This will likely impact the type of life insurance plan you choose:

Term life insurance, which pays the death benefit only if you die within a set number of years, typically offers the lowest premium rates. ‍

Whole life insurance typically has higher premium rates, but those rates come with additional benefits like a plan that accrues cash value for the entirety of your life.‍

Variable life insurance policies also include higher premiums, but that money is then invested and will grow throughout your life. ‍

Universal life insurance premium rates fluctuate based on any changes you make to the cash value of your policy.

3. How Much Flexibility Am I Looking For?
Just as the premium rates change across the different types of life insurance plans, so does the flexibility each plan provides. Term life insurance could be a great option for someone who’s purchasing coverage to serve as income replacement while your children grow up, but it doesn’t afford much flexibility, as you only are covered for a specific period of time. With whole or variable life insurance, you have slightly more flexibility, because you can collect the policy’s cash value if you choose to terminate it before your death. Universal life insurance provides the most flexibility, because you can increase or decrease the death benefit amount as your needs change. If you’re someone who is purchasing life insurance earlier in life and expect your financial situation or the status of your dependents to change as you age, you may benefit from this level of flexibility.
Get Support from a Professional While Choosing Your Life Insurance
It’s important to have answers to these questions to help guide your decision-making process, but don’t feel as though you need to find a policy on your own. At Goheen Insurance, we work hard to provide custom solutions for our high net-worth clients, whether you’re choosing a plan for the first time or looking to audit your current life insurance policy. Contact us today to schedule a consultation and get started!

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Life Insurance, Premium Finance, The Simplicity Company, Tips, Wealth Management


Meet Shawn Goheen, the heart and soul behind Goheen Insurance. Since the early ’90s, Shawn has been more than just a financial advisor; he has been a trusted confidant to high-net-worth individuals. His journey has led him to build strong connections with over 15 specialty lenders and insurance carriers, and relationships with 20+ banks, giving him a rare edge in navigating the often-complex financial world with ease and transparency.